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Saturday, December 9, 2017

Evidence-Based Policy Mistakes

Kausik BasuProject Syndicate
Originally published November 30, 2017

Here is an excerpt:

Likewise, US President Donald Trump cites simplistic trade-deficit figures to justify protectionist policies that win him support among a certain segment of the US population. In reality, the evidence suggests that such policies will hurt the very people Trump claims to be protecting.

Now, the chair of Trump’s Council of Economic Advisers, Kevin Hassett, is attempting to defend Congressional Republicans’ effort to slash corporate taxes by claiming that, when developed countries have done so in the past, workers gained “well north of” $4,000 per year. Yet there is ample evidence that the benefits of such tax cuts accrue disproportionately to the rich, largely via companies buying back stock and shareholders earning higher dividends.

It is not clear whence Hassett is getting his data. But chances are that, at the very least, he is misinterpreting it. And he is far from alone in failing to reach accurate conclusions when assessing a given set of data.

Consider the oft-repeated refrain that, because there is evidence that virtually all jobs over the last decade were created by the private sector, the private sector must be the most effective job creator. At first glance, the logic might seem sound. But, on closer examination, the statement begs the question. Imagine a Soviet economist claiming that, because the government created virtually all jobs in the Soviet Union, the government must be the most effective job creator. To find the truth, one would need, at a minimum, data on who else tried to create jobs, and how.